IRA Contributions Are Not Deductible for Some Participants

Bruce Givner's Income Tax Legal Blogs

Licensed for 41 years

Attorney in Los Angeles, CA

The United States Tax Court has held that an IRA
contribution claimed by a taxpayer was not deductible in determining taxable income.  Zhu v. Commissioner, TC Summary Opinion 2012-8. No. 25570-10S. 1/26/2012.

Kangsheng Zhu and Lanping Zhang were husband and wife, both
over the age of 50.  Zhang was an
active participant in her employer’s qualified pension plan.  Zhu was not covered by a qualified
pension plan. 

On their 2008 joint federal tax return, Zhu and Zhang
claimed an $11 thousand deduction for IRA contributions, $6 thousand for Zhu,
$5 thousand for Zhang.  The IRS
disallowed the $5 thousand deduction for Zhang since she was an active
participant in a qualified pension plan and Zhu and Zhang’s modified AGI was
greater than the phase out ceiling amount.

In 2008, the applicable dollar amount for determining the
deductible amount of an IRA contribution for taxpayers who are active
participants filing a joint return was $85,000.  IRC Section 219(g)(3)(B)(i).  Above $85,000, the allowable deductible amount of an IRA
contribution phased out over a $20,000 range.  For taxpayers over the age of 50, the deductibility of IRA
contributions was further limited. 
Deductions could not exceed the lesser of (1) the deductible amount or
(2) an amount equal to the compensation includable in the taxpayer’s gross
income. See Sec. 219(b)(1), (5)(A) and (B).

Zhu and Zhang reported an adjusted gross income of
$104,034,000.  Zhang’s IRA
contribution phased out at $105,000 because Zhu and Zhang’s modified AGI under
section 219 exceeded that amount. See Rev. Proc. 2007-66, sec. 3.22,
2007-2 C.B. 970, 975.

If you need an Expert Tax Attorney or Expert Tax Litigator,
contact Givner & Kaye at (310) 207-8008. 

Learn which IRA contributions are deductible. The United States Tax Court has held that an IRA contribution claimed by a taxpayer was not deductible in determining taxable income.  Zhu v. Commissioner, TC Summary Opinion 2012-8. No. 25570-10S. 1/26/2012.The Law Offices of Givner & Kaye, APC. (310) 207-8008

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